The Nebraska Department of Health and Human Services paid money to dead people and others who didn’t qualify, wasting at least $7.7 million in federal money.

Nebraska State Auditor Mike Foley confirmed these and other state offences -- another in a series of DHHS scandals -- during a press conference Monday in Lincoln.

Foley said in August 2011 -- just 5 weeks before the end of the federal fiscal year – the DHHS spent $17.6 million via more than 43,000 separate payments in an apparent effort to spend the money before it became unavailable.

A previouw state audit informed federal authorities that those payments were questionable, with particular emphasis on nearly $8 million of the money, Foley said.

The payments are supposed to help low-income persons pay heating and cooling bills if they qualify for help under the federal Low Income Home Energy Assistance Program.

Thousands of people apparantly got the money even though they didn’t qualify, Foley said.

State regulations say people who received prior “crisis assistance” for utility bills cannot receive more payments for one year. And, any additional assistance to such persons is supposed to be made directly to the energy utility companies, as opposed to payments to individual low income consumers, Foley said.

DHHS violated that critical regulation on Aug. 25, 2011 when it spent roughly $7.7 million via nearly 19,000 separate payments (of $250 or $500 each) to individuals who had been prior recipients of “crisis assistance” and were therefore not eligible for the additional payment.

Auditors have serious concerns that most of those payments were not even used to pay utility bills, Foley said. The assistance money could be traced to the payment of utility bills in only a handful of instances.

In a random sample of 135 payments, 19 were cashed at Wal-Mart, 24 at grocery stores, restaurants, and Paycheck Advance, and one was cashed at Ralston Keno, Foley said.

Some program participants were note even behind in their utility bills and had credit balances, yet they received the payments and spent them anyway.

Perhaps more alarming, the audit found that 261 payments totaling nearly $112,000 were sent to persons who are dead -- in some instances, for a year or more.

In most instances, the deaths were known to DHHS before the payments were issued, and the payments to dead participants were cashed at a grocery store, a paycheck advance company and funeral homes. “Signatures” of the deceased were used, raising questions of forgery that law enforcement should pursue, Foley said.

Systemic breakdown

"The systemic breakdown at DHHS did not end there," Foley said.

As recently as June 13, the agency issued another $9.5 million in LIHEAP “supplemental” assistance payments to more than 38,000 recipients.

Once again, auditors found dozens of cases where payments were issued to persons known to be dead and, generally, those payments were cashed.

The audit team also found nearly 1,300 payments totaling more than $500,000 in federal funds that were never cashed. But rather than cancel the uncashed federal payments, the state converted them into state general funds – the legality of which is suspect, Foley said.

The full audit report will be available Recent Publications Released at the state auditor’s website, HERE.

Previously

The scandal comes on the heels of the appointment of a disgraced head of the Illinois child welfare agency to help Nebraska negotiate how much it paid a private company to provide child welfare services.

Erwin McEwen left his job as director of the Illinois Department of Children and Family Services in September 2011 after that state’s executive inspector general found that a man McEwen described as his “personal friend and mentor” – Dr. George Smith — perpetrated a “large scale fraud” upon the state.

McEwen was later hired by the Nebraska DHHS, according to a March 8 report by the Nebraska Watchdog news service.

The DHHS has been beset with scandals since 2009, after Gov. Dave Heineman turned the state's child welfare system over to private companies who demanded more money, broke their contracts and eventually pulled out in all areas but Lincoln and Omaha, and still charged the state millions of dollars.